Time for your cheat sheet on the most important real estate stories of the week.
Think real estate always goes up? It most certainly doesn’t, but that’s not a bad thing. The economic cycles of real estate were observed by American economist Henry George as early as 1876. Real estate economists that follow his work (called Georgists) have built upon his research to accurately predict the US housing crisis 10 years before signs of problems first appeared. We break down his most important lessons, so you can start to gauge where your local market is in the cycle.
Most Canadians know what inflation is, but almost none know how it’s calculated. In Canada we use the Consumer Price Index (CPI), a weighted basket method. One problem is it makes a lot of assumptions, like Canadians devoted a higher percentage of their income to shelter in 2009 than they did in 2015. I’ll give you a minute to stop laughing before continuing.
Noted economist David Ranson described CPI as “an official government-massaged measure,” that doesn’t capture inflation as quickly as the financial markets. He believes that financial markets detect bumps in inflation or deflation up to 6 years before CPI, if CPI captures it at all. So if you’re questioning the government’s claim that inflation only rose 1.6%, you’re probably right.
Global Real estate
Millennial home buying woes? Not if you’re from China. According to HSBC, 70% of millennials in China own their own home. This number seems shocking, until you realize that 90% of the population owns their own home. Around the world, millennials aren’t so lucky. The average rate of millennial homeownership was 40% in the other 8 countries observed.
New construction is selling 50% higher in Canada than it is in the US. This gap is quickly widening, and was only 36% higher just last year. Are Canadian homes worth that much more, or are they just much more optimistic than their American counterparts. More important, is this optimism rooted in any concrete reason? Or is this the same irrational exuberance observed in the US before the Great Recession?
Toronto Real Estate
We hear a lots of people say that they’re overbidding for a detached home, because they’re disappearing and will be worth a ton more. While detached homes in Vancouver are quickly disappearing, Statistics Canada’s latest numbers show that detached stock is actually still growing in Toronto. It’s a misconception that we don’t have any, because a whopping 40% of the city lives in them. Now that that’s debunked, why did you pay 30% more this year than last?
Vancouver Real Estate
The month isn’t over, but we thought we’d take a peek at the non-finalized numbers so far this month for Vancouver. Preliminary numbers show this month is much cooler, with less sales and more inventory than the same time last year. While the numbers are subject to revision (usually upwards), there would have to be a really big revision for it to catch up.